New data reveals uptick in private investment in EMDEs in 2017

Critically constrained public resources on the one hand, and huge existing infrastructure needs for basic services on the other, make private participation in emerging markets and developing economies (EMDEs) not just critical, but in fact, imperative. Crowding in private finance is essential to spur economic development and meet the twin goals of shared prosperity and elimination of extreme poverty, as well as to achieve the Sustainable Development Goals.

In addition to energy, transport, and water & sewerage, the PPI Database, starting in 2017, reports on a new sector—information and communication technologies (ICT) backbone. ICT backbone includes fiber optic cables, mobile towers and other hard assets with an active government component. Tracking private investment in this sector will be increasingly important due to the critical role that ICT plays in development. With some seven billion mobile connections and a 60 percent coverage in terms of 3G networks worldwide, the ICT sector is critical for disruptive innovation and for leapfrogging development and enhancing the impact under the Forth Industrial Revolution.

Megaprojects, more countries and more government support fueled PPI in 2017

The recently-launcheddata from the PPI Database for the year 2017 marks an increase of 37 percent in investment levels from 2016 levels. Yet, it remains the second lowest level of investment in the past 10 years and is 15 percent lower than the past 5-year average investment level. On closer examination, the increase over 2016 levels is attributable to a few megaprojects in China and Indonesia as well as a recovery in South Asia, led mainly by Pakistan. Also notable is the fact that the average project size increased by 26 percent in 2017, with some 20 megaprojects averaging $2.4 billion per project and accounting for 51 percent of the total PPI investment.

The upward turn in investment levels in 2017 is certainly positively correlated with the increase in government support to projects, signifying the important role played by government policy, regulation, governance and transparency in encouraging greater private participation in infrastructure. Government support to projects increased from 94 projects in 2016 to 135 in 2017. It should be noted that the declining share of government support to projects corresponded to the decline in investment levels from 2012 to 2016.

East Asia and the Pacific lead PPI globally, while energy dominates sectoral investments

China, Indonesia, Mexico, Brazil and Pakistan were the top five investment destinations and together attracted 58 percent of global investments.

Barring Mexico, with a share of commercial financing of 63 percent, for all the other top five investment destinations the share of commercial financing is quite low with Indonesia raising only 23 percent of its total debt as commercial finance, Pakistan—only 7 percent and Brazil—only 4 percent.

Egypt saw an unprecedented number of projects, while Brazil, Colombia and Turkey saw a sharp drop in the number of projects.

Other characteristics of 2017 private infrastructure investments in EMDEs

Renewables continue to increase in numbers in 2017 but saw a drop in the share of electricity generation investment due to coal megaprojects in Indonesia worth $7.7 billion. Of the 197 electricity generation projects in 2017, 173 projects (88 percent) are renewable energy projects. Notably, the share of renewable energy investment in 2017 dropped to 57 percent from the past five-year average of 64 percent.

Of the total investment, 70 percent was debt-financed, with 24 percent of debt raised from bilateral providers and 22 percent from commercial debt providers. Fifty-five percent of the debt raised was from international sources. Private sources financed 45 percent of investments, public sources financed 25 percent, and development finance institutional sources—30 percent.

On the one hand there is every reason to be optimistic, private investment in infrastructure in EMDEs is showing signs of recovery. But on the other, whether or not this was a one-off spike fueled by a few megaprojects and favorable policy regimes in some countries—only time will tell. Stay tuned to the PPI database site for more updates on private investment levels in EMDEs.

The PPI Database is a product of the Infrastructure, PPPs & Guarantees (IPG) Group and is managed by the World Bank Group Singapore Hub for Infrastructure and Urban Development. It the most comprehensive database of private investments in infrastructure in the developing world. This endeavor was carried out by the PPI Database team led by Deblina Saha and comprising Seong Ho Hong, Alex Shao, Akhilesh Modi, and Iuliia Zemlytska.

Comments

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• From over almost 27 years data spanning shows escalation in PPI & uptick of EMDEs in 2017. Data from the PPI Database for the year 2017 marks an increase of 37 percent in investment levels from 2016 levels. This is attributable to a few megaprojects in China and Indonesia as well as a recovery in South Asia, led mainly by Pakistan. Government support to projects increased from 94 projects in 2016 to 135 in after a decline in between 2012 to 2016. Fifty-two countries received PPI investments, which is a significant increase over the 2016 levels at 37 countries and a past 5-year average of 41. China, Indonesia, Mexico, Brazil and Pakistan were the top five investment destinations and together attracted 58 percent of global investments. Investments in the world’s poorest countries reached 8.5 percent of global investments in 2017 compared to 4.3 percent in 2016, with $7.9 billion worth of investments across 35 projects in 17 countries compared to the past 10-year average of 14 countries. Of the 197 electricity generation projects in 2017, 173 projects (88 percent) are renewable energy projects. Renewable continue to increase in numbers in 2017 but saw a drop in the share of electricity generation investment due to coal mega projects in Indonesia worth $7.7 billion. However, I do not find any concrete evidence of PPI investment in Bangladesh despite its ascending towards mid income group.

The private participation is fundamental in all infrastructure projects as illustrated in the successful
experience of PPPS projects through the World Bank support. ICT is essential to promote private
investment in EMDES , there is no indusrial revolution without ICT.
Yours Very Respectfully,
Dr. Mohamed Taher Abdelrazik Hamada, Ph.D
Senior American Citizen
Retired Professor at Strayer University , USA

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